Kevin Ley & Anor v Douglas Suttle & Anor

Permission to amend a statement of case after expiry of limitation depends on whether the amendment introduces a new cause of action and, if so, whether it arises from the same or substantially the same facts. The court compares the essential factual elements of the existing and proposed claims. The statutory purpose is to prevent a defendant having to investigate matters outside the reasonable ambit of the original claim. Where the court has jurisdiction, permission remains discretionary and is governed by the overriding objective. An amendment must also have a real prospect of success, carry some degree of conviction, be coherent, properly particularised and supported by evidence establishing its factual basis.

The joint liquidators of CL Realisations 2020 Limited applied to amend an existing application under sections 212 and 238 of the Insolvency Act 1986 against two former directors. The proposed amendments concerned alleged breaches of fiduciary duty arising from loans made by the company to a purchaser of its shares, and an alternative allegation that the transactions constituted unlawful distributions of capital.

The amendments were opposed principally on limitation, cause of action and merits grounds. The central questions were whether the amendments were within the court’s jurisdiction under CPR 17, whether any new claims arose from the same or substantially the same facts, and whether permission should be granted under the overriding objective.

1. Amendments concerning alleged breaches of fiduciary duty. The amendments to paragraphs (1), (2)(a) and (2)(b) did not introduce new causes of action. The existing pleading already alleged breaches of fiduciary duties under sections 171–177 of the Companies Act 2006 and alleged breaches of the duty to act in the company’s best interests. The proposed matters added consequences or particulars. The addition of better particulars does not create a distinct cause of action.
2. Same or substantially the same facts. Even if the amendments introduced new causes of action, they arose from the same or substantially the same facts. The existing dividend allegations already required consideration of the company’s solvency and the respondents’ decision-making. The existing claims concerning the additional loans also required evidence of the respondents’ subjective thinking or, absent such evidence, application of an objective test.
3. Unlawful distribution allegation. The proposed amendment alleging distributions of capital contrary to section 830 of the Companies Act 2006 introduced a new cause of action. It did not arise from the same or substantially the same facts because it depended on the proposition that the share purchase agreement and loan agreement were shams or legally ineffective. That allegation involved dishonesty and was not reasonably within the factual ambit of the existing claim.
4. Discretion and merits. Permission was granted for the amendments to paragraphs (1), (2)(a) and (2)(b). The amendments did not materially increase the respondents’ investigative burden and the applicants had not delayed in a manner justifying refusal. Permission to introduce the unlawful-distribution claim was refused both for want of jurisdiction under CPR 17.4 and, alternatively, in the exercise of discretion. The proposed claim was strained, incoherent, insufficiently particularised and unsupported by evidence establishing its factual basis. The refusal did not prevent reliance on the accounting treatment of the loans in the remaining claims.